BAE wins huge Australian frigate contract

Australia is awarding Britain's BAE Systems a $26 billion contract to build a new generation of frigates, the British government said Thursday, as the Pacific nation undertakes an ambitious naval programme in part to counter China.

"BAE Systems has been chosen as the preferred bidder for the 'SEA 5000' Future Frigate competition," said British Prime Minister Theresa May's office.

"The agreement will secure more than 4,000 jobs in Australia and also boost Britain's export economy for generations to come," it added.

Australian Prime Minister Malcolm Turnbull is expected to confirm Friday that a variation of BAE's new Type 26 frigate beat off competition from Italian company Fincantieri and Spain's Navantia SA.

In a statement to the Wall Street Journal, Turnbull said: "BAE's Global Combat Ship will provide our nation with one of the most advanced anti-submarine warships in the world, a maritime combat capability that will underpin our security for decades to come."

The government has said the nine frigates will be built in Adelaide under the control of the state-owned company ASC Shipbuilding.

According to the Sydney Morning Herald, Turnbull said that for the duration of the frigate construction programme, ASC Shipbuilding will become "a subsidiary of BAE Systems".

Britain said the deal was "a result of four years of intensive government engagement," and hailed it as a boost for its post-Brexit prospects.

"The sheer scale and nature of this contract puts the UK at the very forefront of maritime design and engineering and demonstrates what can be achieved by UK industry and government working hand-in-hand," said May.

"We have always been clear that as we leave the EU we have an opportunity to build on our close relationships with allies like Australia. This deal is a perfect illustration that the government is doing exactly that."

The frigates are due to enter service in the late 2020s as the backbone of the Australian Navy's fleet, part of a massive shipbuilding programme that also includes 12 new submarines and 12 offshore patrol vessels.

The big increase in spending comes as Beijing flexes its own muscles in the region through a military build-up in the contested South China Sea, and as countries keep a wary eye on nuclear-armed North Korea.

BAE Systems Chief Executive, Charles Woodburn, said the decision "reinforces our position as a leading designer and builder of complex maritime platforms.

"I am proud that our world class anti-submarine warfare design and our approach to transferring technology and skills to the nations in which we work is expected to contribute to the development of an enduring world-class naval shipbuilding industry in Australia," he added.

French naval contractor DCNS has been selected to design and build Australia's new submarines at a cost of Aus$50 billion in Adelaide, beating off competition from Japan and Germany.